AEGR Pulls Back, But Remains Sheltered From Major Losses Print E-mail
By Brian Wilson - Lead Contributor   
Friday, 21 June 2013 10:35
After a seemingly unstoppable rally since the US launch of HoFH (Homozygous familial hypercholesterolemia) drug Juxtapid (lomitapide), Aegerion Pharmaceuticals (NASDAQ: AEGR) finally “cooled off” to some extent, although it’s worth noting that the CHMP decision contained very positive commentary regarding the drug’s efficacy in the treatment of high cholesterol. This paves the way for a smooth launch into Europe, and an eventual realization of the sales revenues that analysts have been justifying their high price targets with. Note that Lojuxta is the commercial name for lomitapide in Europe, and has the same active ingredient as Juxtapid.

JP Morgan and Canaccord, probably the two most bullish firms covering Aegerion, have 88 and 90 price targets on the stock respectively.

Although many have pointed out the tiny pool of patients that Aegerion and competitor ISIS will be fighting over, Aegerion has the luxury of commercializing the most efficacious drug in the indication (based on clinical trial data). In late stage trials, the drug was able to reduce LDL-cholesterol in patients by 40%. Lomitapide is a selective inhibitor of microsomal transfer protein (MTP), which is involved in the assembly of lipoproteins that ultimately build LDL levels in HoFH patients.

Kynamro (mipmersen sodium) instead inhibits apolipoprotein B – another protein that is involved in the formation of lipoproteins and acts as a ligand for LDL receptors.

The prices of the two drug (patient/year) are extremely high too – at $295,000 and $176,000. This pricing makes it feasible for Aegerion to sell to only 600 or so HoFH patients while justifying its market capitalization at a revenue multiple just north of 10, although the upside is also limited due to the scarcity of HoFH patients. 

The Takeaway

Aegerion retains full rights to the most efficacious drug for a deadly and rare orphan indication, which allows the company to justify extremely high prices for the drug while enjoying a competitive advantage against ISIS. The patient population limits the upside of AEGR, although the stock has some more room to run – especially after the recent pullback. A downside situation should still have a hard time bringing AEGR below ~$50/share or so based on the pricing of the drug and the efficacy profile that the drug has established up to this point. This might be a good stock to write puts on, with the strike being adjusted for each investor’s risk appetite.

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